According to the Arkansas Insurance Department, Act 1194 of 2005 states that no insurer licensed to transact the business of motor vehicle liability insurance in Arkansas may cancel an insured’s policy, increase the premium, or negatively impact the insured’s risk rating solely because of an accident for which the insured is innocent of any negligent or intentional act that was the proximate cause of the accident, regardless of whether a claim is filed under any insurance policy.
The department defined “A proximate cause” as one that in a natural and continuous sequence produces damage, and without which the damage would not have occurred.
The department clarified that the Act only applies to commercial and personal motor vehicle liability insurance. It also interpreted “innocent” to mean not at fault with regard to any negligent or intentional act that was the proximate cause of any accident or injury, to be determined in accordance with policy language and state law.
If a carrier pays any portion of a claim, such payment is indication that the carrier has determined that the insured has some percentage of fault and is therefore not “innocent.” Cost of defense shall not be a factor in determining whether a person is “innocent.” Cost of defense may, however, be considered a “loss” under Ark. Code Ann. § 23-63-110.
For more information, contact Arkansas Insurance Department’s Legal Division at (501) 371-2820 or e-mail at insurance.legal@arkansas.gov.
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